SWEDEN Law and Practice Contributed by: Corinne Ekman, Mikael Nagy and Joacim Kanstedt, Gernandt & Danielsson Advokatbyrå KB
With the exception of Saminvest and Swedish Venture Initiative, there are very few fund-of- funds on the Swedish VC market. There is growing discussion around continua - tion funds and other secondary structures within the VC market in Sweden, particularly among more mature VC funds seeking liquidity for old - er assets and in light of extended exit horizons in certain verticals such as deep tech and life science. While continuation funds are still very uncommon in the Swedish VC market, such structures have been observed among later- stage growth and PE funds. Furthermore, ever - green funds (which typically, unlike other funds, do not have a fixed investment period and/or end date) are also growing increasingly common on the Swedish market. During 2024, Northern Horizon launched its first evergreen fund with a specialised focus on social infrastructure. Also, as mentioned above, Industrifonden has an evergreen structure in place in order to be able to focus on long-term value creation rather than short-term returns. Evergreen funds are, howev - er, still more common on the private equity side, noting in particular that EQT communicated that it intends to expand its offering with an aim to have up to five active evergreen funds within the coming year. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence The level of due diligence conducted by VC fund investors in Sweden varies, mostly depending on the relevant investment round, valuation and size of investment as well as the particular indus - try of the target and the relevant legal risks. The due diligence is also tailored based on issues
that are specific for the fund, including ESG if the fund has adhered to the SFDR framework. For investment in early-stage start-ups, the legal due diligence can be rather limited, with the investor’s main focus being on the commer - cial/financial aspects and the business plan. In later-stage VC investments and growth, the due diligence is generally more robust and in line with what one would expect in an M&A transaction. Typical key areas of focus for VC fund investors in Sweden are: • title and ownership – capitalisation table, dilu - tive instruments and any incentive schemes; • employment terms – founders and key employees’ employment agreements, veri - fication of existence of non-compete/non- solicitation clauses, confidentiality clauses and sufficient assignment of intellectual property rights; • IP/ownership of technology – ownership and robustness of IP needed to run the business, particularly if third-party consultants have been engaged in development; • material agreements – critical agreements that underpin the business model and opera - tions; • regulatory – assessing regulatory require - ments or approvals, including whether the target’s business is subject to the FDI Act (which, if applicable, will prolong the time necessary between signing and closing of an investment); and • disputes – ensuring no major ongoing dis - putes. 3.2 Process In Sweden, the timeline of a new financing round in a growth company with a new lead inves - tor can vary, and the trend over the last year
521 CHAMBERS.COM
Powered by FlippingBook